Homebuyers in Karnataka on shaky ground as K-RERA yet to build a strong foundation

Long way to go before it can be said that the authority has succeeded in reforming and professionalising the real estate sector to achieve the objectives of the Act, say property owners

July 08, 2022 01:32 am | Updated 12:42 pm IST - Bengaluru

A bird’s-eye view of the southern parts of Bengaluru city.

A bird’s-eye view of the southern parts of Bengaluru city. | Photo Credit: K. MURALI KUMAR

Ananth (name changed on request) was looking to buy a house in 2014, when he came across an apartment complex on Begur Road which looked like it was nearing completion. Assuming it would be ready in six months or so, he invested over ₹43 lakh and moved in in 2015.

Cut to 2022, and he says, “Of the nine floors, the last floor is still incomplete. The lift does not have a licence and is running on god’s grace. One block, for which the sanctioned plan was given for a residential building, has been converted into a commercial space now. There is no maintenance whatsoever.” Ironically, the project, which was started in 2010, was to be completed in 2012.

Tired of the builder’s indifference, in 2020, the association approached Karnataka Real Estate Regulatory Authority (K-RERA). “We expected a resolution in six months and came to a near judgement last March. Then the judge changed, and the new judge wanted to hear the case again. The builder did not appear in the first hearing, the judge said within a certain deadline, all certificates needed to be presented. That obviously didn’t happen as they did not even have a commencement certificate. After that, everything went silent. No dates were given for our hearings, there was no response to calls, and the chairman met us and said he will get back to us shortly. That was the end of it,” said Mr. Ananth.

Today, residents of the occupied flats are living in a complex with incomplete buildings, some of which have seen one coat of whitewash, an STP with no approval, and a general lack of amenities. What has angered them further is that the same promoter has got two new projects registered with K-RERA.

Role of K-RERA

It was after a long fight by home buyers that the RERA Act of 2016 was implemented in Karnataka in May 2017. On July 10, RERA in Karnataka completes five years as the Karnataka Real Estate (Regulations ad Developments) Rules were notified on that day in 2017. However, home buyers say there is still a long way to go before we can truly say the K-RERA has succeeded in reforming and professionalising the real estate sector to achieve the objectives of the Act.

At present, the authority has received a total of 6,906 complaints, of which 3,381 have been disposed of. In addition to delay in possession, lack of relevant registration and documents and incomplete amenities, home buyers have also had to deal with other problems such as mismanagement of funds.

Only last month, the Directorate of Enforcement (ED) arrested Sushil P. Mantri, director of the Mantri Developers Pvt. Ltd., under the Prevention of Money Laundering Act (PMLA), 2002, after initiating investigation in March 2022 on the basis of an FIR registered in Subramanyapura police station in 2020 against the company and its directors and other employees.

Money-laundering cases

Many home buyers had filed complaints with the police and with the ED alleging that the accused entities/ persons were involved in money laundering and had induced prospective buyers with rosily painted schemes, misleading brochures, falsification of delivery timelines and collected more than ₹1,000 crore as advance money from thousands of buyers. They had also alleged that they had not been given possession of their flats even after passing of seven to 10 years.

More recently, the ED provisionally attached 16 immovable properties belonging to Dreamz Infra India Ltd., TGS Constructions Pvt. Ltd., Disha Choudhary, MD of Dreamz Infra India Ltd, Mandeep Kaur, MD of TGS Constructions Pvt. Ltd and other related persons/entities in connection with the ponzi investment scheme run by them. In this case too, the ED had initiated money laundering investigation on the basis of more than 125 FIRs registered in Bengaluru against the accused companies and individuals for allegedly duping investors by taking huge deposits promising affordable apartments in and around the city.

The ED had said from 2011-12 to 2016-17, the accused entities/persons collected more than ₹ 722 crore from more than 10,299 customers and misappropriated the said funds for their own benefits and cheated customers without handing over the flats and without refunding the deposit amounts to them.

Investment fund

Santosh Patil, who had invested in a Mantri property on Kanakpura Road, which was launched in 2015, could finally see possession of his house, but not because of K-RERA. Their project received the SWAMIH Investment Fund I, a special window for completion of construction of affordable and mid-income housing projects cleared by the Union Cabinet. “Among their projects, this was the one that got the fund and is nearing completion. We are hoping the OC will come soon,” he said.

“From the K-RERA perspective, there are a lot of projects are stuck, many cases have been filed against lack of progress, completion and mismanagement of funds. But there is no action from K-RERA. In the last two years, hearings and judgements have become far and few. Case are piling up. The authority also thinks their job ends with the order and the implementation is not being followed up. Even after five years, there is not much improvement in new projects also and K-RERA is being ignored. Sale agreement has been gazetted, but no one is following it,” he added.

For home buyers, the long wait is a taxing one mentally, physically and financially. M.S. Shankar, general secretary, Forum for People’s Collective Efforts (FPCE) — formerly Fight for RERA, said apart from the enforcement of RERA Act as per its intent by the Authority being a concern, the government has never reviewed the functioning of the Regulatory Authority and Tribunal appointed by them.

“One thing that stands out very clearly is that the legal framework aimed at empowering homebuyers of the country has been further fortified through various decisions of the apex court and other judicial forums. This corroborates the fact that the angst of homebuyers, being cheated at the hands of builders with their life’s savings was not only sensed by the Executive and the Legislature but also by our Judiciary. This is the biggest success of RERA,” he said.

Long way to go

He pointed out that the real-estate sector is a long way away from being rid of malpractices. Homebuyers aren’t yet sure if project registration with K-RERA guarantees its timely possession with all promised facilities and amenities.

“It is only of late that the Regulatory Authorities and the Appellate Tribunals are asserting the powers vested with them under the Act. The pre-condition of deposit for filing appeals by the builders was conceptualised in the law to be a deterrent to ensure builders don’t conjure up filing appeals just to avoid regulatory orders. This is a huge win for the homebuyers hoping early resolution of dispute,” he added.

The responsibility to restore trust in the sector and confidence of the prospective homebuyers lies squarely on the shoulders of the regulatory authorities and the government, he said. “It should be the endeavour of all the regulatory authorities to proactively act and not only to react. They should develop mechanism of intelligent inputs system by which they can intervene in projects well on time and bring them back on track before it’s too late, including spot checks to ensure all promised facilities and amenities are provided. This would also help avoid unnecessary litigation,” pointed out Mr. Shankar.

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